Begin Unrelated Story: I was talking with an employee who works for Mind Your Own Business–a company that makes small business accounting software. She was relating a time she had been pulled over by a policeman who asked her the standard questions, “where are you going?”, “where do you work?”. When asked where she worked, she replied “Mind Your Own Business”. The cop was kind of surprised and started to explain that it would probably be better to cooperate. She had to pull out her business card to prove that she, indeed, worked at Mind Your Own Business. End Unrelated Story
Okay, back on track. When you do work, you are providing value to someone. Actually, you are providing value to several people. You are providing value to yourself (assuming you get paid for your work). You are providing value to the end customer and you are providing value to your employer. If you work for the same employer for years, you will have built a great deal of value that goes beyond just the work you were paid for. Your work is contributing to making the business, itself, more valuable. Eventually, the owners of the business can cash out. They can take the value that has accumulated and sell the business to someone else.
The problem (from your standpoint) is that a good portion of the value you help create is never going to benefit you. Someone else is taking the risk of running the business and so they are getting the reward.
Now, assuming you are someone who puts a lot of effort into being highly productive, this means the value that you are producing is much greater than the value you receive. The discrepancy is caused by the fact that someone else (the business owner) is being paid to take the risk of being in business. Part of the value you produce is going to paying for your job security. So basically, you make a little less in order to have a secure job. Sounds reasonable right?
Well, not really.
Just how secure is your job? Companies merge, fold, downsize, and do all kinds of things that end up laying off employees. The idea that your job is secure is probably more of a fantasy than reality. So, what ends up happening to the value of what you produce that is in excess of what you are paid?
Several years ago, much of it went to support work systems. The cost of running your own business was so great that you had to work for someone who hired enough people to justify the cost of a computer system, network, telephone system, advertising, payroll system, etc.
This is not as much the case today. Many of the systems that were very expensive 5 years ago are now handled by simple subscription based services. For example, I pay $50 per month to have a company run my payroll and handle direct deposit for my company. I pay another $30 per month for a dedicated webserver when a T1 line alone would have cost $1,200 just a few years back. For a few hundred dollars each month you can even get an ERP CRM system that rivals the systems many Fortune 500 companies put in for millions of dollars.
My point is that the benefits of working for a large company are shrinking. If you are someone who really concentrates on doing work that is above average, you should probably be considering a plan to go into business for yourself. It isn’t easier to work for yourself, but if you are willing to work hard, you can build your own business in a way that captures as much of the value of your work as possible instead of basically paying someone else for a false sense of security.
Originally published May 3, 2007.
amen :)
I would of said MYOB instead ;) I remember selling their software to people. Never used it myself though.
Hey, I was trying to find a contact form or something here or on your personal site, but to no avail.
I need a VERY reliable web server. I therefore wondered if you have any hosting advice in general, and where you have your dedicated web server in particular.
The plethora of web apps, not to mention the willingness of many businesses to work with freelancers is increasing all the time. I would agree working for yourself is great, but I can tell you from firsthand experience sometimes you can feel very insecure about whether you will have a job tomorrow.
I’d love to have my own business. My problem is healthcare. I’m married, and while my health is pretty good, my wife is literally uninsurable. Some years my company (mid-size, self-insured plan) has paid nearly as much for my wife’s care as they’ve paid me in salary.
One of the main benefits of mid-to-large companies is employer-paid, or at least employer-risk-pooled, healthcare. I make less than I could, and don’t work on things that I think would improve people’s lives, chiefly so that I don’t have to bury my wife.
@Tom – In Kansas, if you start your own company that hires you and your wife, you can get group insurance. If your wife has pre-existing conditions they can raise her premium by up to 50% of the normal rate. Laws vary from state to state, but there are often ways to get insurance through your own business.
This is really interesting: “My point is that the benefits of working for a large company are shrinking. If you are someone who really concentrates on doing work that is above average, you should probably be considering a plan to go into business for yourself. It isn’t easier to work for yourself, but if you are willing to work hard, you can build your own business in a way that captures as much of the value of your work as possible instead of basically paying someone else for a false sense of security.”
I consider myself a very hard worker and I would love to work for myself, but, these days, I put the idea out of my head and tell myself that I’m lucky to have a job and health insurance, etc. and I should just stay put. Does anyone else think this way? Am I just using the economic state as an excuse to stay where I’m comfortable?
@Positively Present – So how secure is your job? It could be gone tomorrow.
I’m not trying to suggest that everyone quit their job this week, but if you want to work for yourself it isn’t going to happen on its own.
agree with mark shead,
at least combine both of them first
I understand Tom’s predicament. My wife suffers from a medical condition that would bankrupt us were it not for my employer sponsored healthcare. Her medical condition leaves her unable to work. Going out on my own means making enough money from day one to cover the cost of her medical bills, two kids, and my own healthcare needs ( I have Type 1 diabetes ). I’ve already looked into it and buying our own health insurance would cost over $2000/month.
@Mark – I’ve priced insurance here in Maryland, both through a small business broker and through private insurance. $1800/month just for my wife, with a five thousand dollar deductible and 30% copay.
My wife’s company is very small (just 9 people) and they can’t afford to offer insurance to anybody, in part because they’d have to offer it to everbody, and she’d make the premiums far too expensive. They all either rely on their spouses, or just risk it.
My job is pretty secure, but if I did lose it I’d at least have access to COBRA at my current employer’s (risk-pooled) rate – much less than I’d pay on my own – while I looked for a new job with a big employer. Again, one of the unsung advantages of working for a mid-size to large employer.
Sigh.
This hit home this week as 2 partners left our 4-partner company leaving one assistant with no job (she worked for both partners).
I have a home-based business that I can fall back on & work full time, but she has absolutely nothing to fall back on.
On the health insurance issue, my fiance’ covers mine b/c his premiums are less than half for both of us than what mine would be alone. This is mainly due to the fact that we have a couple of very unhealthy people in our firm. It is a small company, so the average really only helps those who would otherwise have even larger premiums.
NYT on a really scary example: http://tinyurl.com/dgsprg
tc>
I really like the opening line. Just as well she had a business card, or it may have ended up quite nasty for a time.